Minimizing MAGI for PPACA

[NoMoreJob]

I'm assuming that Georgia will be substantially the same as Florida as far as the process. I was able to access the system yesterday evening and answered the questions. Today, I got an email telling me I had a message and to log in. (I was using Safari and getting nowhere,,,,changed to Chrome and was on the log in page in about 5 minutes ....). Was slow as could be but was told I had passed their "testing" and was able to go thru the rest of the process to enroll.

My MAGI is going to have to be managed between taxable and non taxable accounts but I estimated on the high end since, if you are under-subsidized, you'll receive a refund in 2015 when filing. My personal plan is to live out of non-taxable accounts until December at which time I'll reimburse myself the amount necessary to bring my MAGI to the magic number for the subsidy.

The only reference to 2012 (or 2013) that I recall was asking me whether or not my income would be substantially the same in 2014, to which I answered "no." Beyond that, they asked for permission to look at up to five years of returns (no problem).

Be aware that there is subsidy with regard to premiums AND subsidy in terms of cost sharing of (lower) deductibles, (lower) max out-of-pocket and co-pays. The former runs up to 400% FPL but the latter only to 250% with tiers below that. So there can be substantial additional benefit to managing your income below 250%, 200% or 150% (the tiers for cost sharing).

 

[GLM]

I know they ask you to estimate your 2014 on the application. It is my understanding that they then compare the estimate (through Equifax I believe) to your 2012 return . If it is within 10% the estimate is accepted . If you predict your 2014 MAGI more than 10% below what it was in 2012 you will not get the subsidy up front unless you go through some sort of verification process. I just anticipate that process to be painful.....

The more I think through getting the subsidy later the more I agree it should not impact our income in the year we get the credit. Sort of like a federal tax refund does not. Not verifying before the year starts and waiting for the credit means you need to have the cash flow up front. Additionally , if you would qualify for any reduced co pays or deductibles and need to use them you miss out on those savings.

Going over publication 560 trying to confirm just how long you can wait to do the employee contribution into the Individual 401K. Perhaps my Vanguard contact will be useful there.

 

[rbmrtn]

I know they ask you to estimate your 2014 on the application. It is my understanding that they then compare the estimate (through Equifax I believe) to your 2012 return . If it is within 10% the estimate is accepted . If you predict your 2014 MAGI more than 10% below what it was in 2012 you will not get the subsidy up front unless you go through some sort of verification process. I just anticipate that process to be painful.....

That is correct, except for 2014 they can ask for more documentation if you don't have a reasonable explanation. I would just say I retired

This is a link the to CMS rule for it, http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/income-verification-8-5-2013.pdf

 

[jflynn4]

That is correct, except for 2014 they can ask for more documentation if you don't have a reasonable explanation. I would just say I retired This is a link the to CMS rule for it, http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/income-verification-8-5-2013.pdf

In my case, I'm estimating income for 2014 at double what the 2012 figure was ... And I was accepted and have already completed enrollment. Perhaps they're not being too fussy if you're projecting higher income even if that qualifies you for subsidy?

 

[cmyawn]

My strategy is to keep my MAGI under the 400% of poverty level (family of 2, DW and myself). We will each have our own ACA compliant policy: DW takes prescriptions and will have a policy w/ copays, reasonable deductible, etc. I will have a high deductible plan so can use a HSA (and I turn 55 in 2014 so can make an extra $1000 a year catch up contribution if needed).

I can pay any out of pocket expenses for myself and for DW from the HSA. And the HSA contribution gets deducted from income before MAGI.

Will manage selling of securities with many varied levels of appreciation to keep our income below 400% of the poverty level...but have to keep that up for 10 years. So need to be in the 350% range, want to be sure to get subsidies every year till I qualify for Medicare.

If we turn out to need money later, could take out a HELOC and heck even sell our house (no mortgage) and rent...and live for a few years off the house sales proceeds.

Any thoughts?

 

[Animorph]

My strategy is to keep my MAGI under the 400% of poverty level (family of 2, DW and myself). We will each have our own ACA compliant policy: DW takes prescriptions and will have a policy w/ copays, reasonable deductible, etc. I will have a high deductible plan so can use a HSA (and I turn 55 in 2014 so can make an extra $1000 a year catch up contribution if needed).

I can pay any out of pocket expenses for myself and for DW from the HSA. And the HSA contribution gets deducted from income before MAGI.

Will manage selling of securities with many varied levels of appreciation to keep our income below 400% of the poverty level...but have to keep that up for 10 years. So need to be in the 350% range, want to be sure to get subsidies every year till I qualify for Medicare.

If we turn out to need money later, could take out a HELOC and heck even sell our house (no mortgage) and rent...and live for a few years off the house sales proceeds.

Any thoughts?

I don't think I'd go so far as to sell my house. That's some dedication to subsidies. If the total interest on the HELOC exceeds the subsidy value, I don't think that'll be a great idea.

If you can stand it, it might be beneficial to let one year go over the limit, way over. That would allow you to sell a bunch of appreciated equities to cover yourself for the next few years.

 

[daylatedollarshort]

My strategy is to keep my MAGI under the 400% of poverty level (family of 2, DW and myself). We will each have our own ACA compliant policy: DW takes prescriptions and will have a policy w/ copays, reasonable deductible, etc. I will have a high deductible plan so can use a HSA (and I turn 55 in 2014 so can make an extra $1000 a year catch up contribution if needed).

I can pay any out of pocket expenses for myself and for DW from the HSA. And the HSA contribution gets deducted from income before MAGI.

Will manage selling of securities with many varied levels of appreciation to keep our income below 400% of the poverty level...but have to keep that up for 10 years. So need to be in the 350% range, want to be sure to get subsidies every year till I qualify for Medicare.

If we turn out to need money later, could take out a HELOC and heck even sell our house (no mortgage) and rent...and live for a few years off the house sales proceeds.

Any thoughts?

I think that is a great plan.

We already got the HELOC and planned to downsize before too long anyway. Personal residence sales gains have pretty high thresholds before taxes kick in, usually $500K for a married couple.

I think for us going with the Bronze plan will also help. The monthly premiums when I last checked didn't go up as much as the other plans if we got closer to the 400% level, which leaves us some headroom to do Roth conversions without losing a lot of the premium subsidies.

Most years we do not have very high medical bills, so I think on average the Bronze with an HSA will work best for us. If we knew we would have high medical expenses in a coming year, then a different plan might work out better.

 

[daylatedollarshort]

I don't think I'd go so far as to sell my house. That's some dedication to subsidies. If the total interest on the HELOC exceeds the subsidy value, I don't think that'll be a great idea.

For some households the subsidies can worth 10K or more in after tax dollars for possibly years into the future. I am sure there are many households that might come out ahead by staying under the subsidies for that kind of money.

 

[cmyawn]

On selling the house: may need to downsize or move to a less stressful area (we currently live on the coast in a very hurricane-prone) anyway. So if could net say $150K by selling this house and buying a less expensive one, could help facilitate maximizing our subsidies.